25-214. Management and control
A. Each spouse has the sole
management, control and disposition rights of each spouse's
separate property.
B. The spouses have equal management, control and
disposition rights over their community property and have
equal power to bind the community.
C. Either spouse separately may acquire, manage, control or
dispose of community property or bind the community, except
that joinder of both spouses is required in any of the
following cases:
1. Any transaction for the acquisition, disposition or
encumbrance of an interest in real property other than an
unpatented mining claim or a lease of less than one year.
2. Any transaction of guaranty, indemnity or suretyship.
3. To bind the community, irrespective of any person's
intent with respect to that binder, after service of a
petition for dissolution of marriage, legal separation or
annulment if the petition results in a decree of dissolution
of marriage, legal separation or annulment.
25-215.
Liability of community
property and separate property for community and separate
debts
A. The separate property of a
spouse shall not be liable for the separate debts or
obligations of the other spouse, absent agreement of the
property owner to the contrary.
B. The community property is liable for the premarital
separate debts or other liabilities of a spouse, incurred
after September 1, 1973 but only to the extent of the value
of that spouse's contribution to the community property
which would have been such spouse's separate property if
single.
C. The community property is liable for a spouse's debts
incurred outside of this state during the marriage which
would have been community debts if incurred in this state.
D. Except as prohibited in section 25-214, either spouse may
contract debts and otherwise act for the benefit of the
community. In an action on such a debt or obligation the
spouses shall be sued jointly and the debt or obligation
shall be satisfied: first, from the community property, and
second, from the separate property of the spouse contracting
the debt or obligation.
Filing bankruptcy for
one spouse and not the other: Discharge of the marital
community and discharge of the non-filing spouse assuming
that they are both married at the time of incurring of the
debt and the filing the petition.
Example one: A Debtor incurs
debt as a separate and community obligation. If Debtor
files bankruptcy and the non-debtor is not included, the
Discharge will discharge the obligation for the Debtor and
the marital community; because the non-debtor did not incur
the debt, there is no obligation for non-debtor and his
separate property.
Example two: If the Non-Debtor
incurs the debt, the community is obliged as is the
Non-Debtor. Debtor files a Bankruptcy, the 524 Community
Discharge discharges the community obligation. Non-Debtor's
separate obligation is not discharged. However, the
Creditor can pursue only the non-debtor's separate
property. The non-debtor's contribution to the community is
not subject to collection because that portion is only
subject to collection if the debt is from prior to the
marriage under ARS 25-215 (B). In general, see ARS 25-215.
Warning: If
the event that the divorce happens, the debts are no longer
community debts but joint debts and the 524 Community
Discharge is inapplicable. See Frazier v. Goldberg (Ariz.
Ct App)
Subsection (a) of 11 U.S.C. §524
addresses the split discharge, when only one spouse attains
a discharge in bankruptcy, in community property states.
The legislative history of this section says that "if
community property was in the [bankruptcy] estate and
community claims were discharged, the discharge is effective
against the community creditors of the non-debtor spouse as
well as of the debtor spouse. House Report No. 95-595, 95th
Cong., 1st Sess. 365-6 (1977), Senate Report No. 95-989,
95th Cong., 2d Sess. 80 (1978). § 524(a)(3) treats the
effect on the non-debtor spouse of a discharge of a
debtor in a community property state when the non-debtor
spouse is liable on the community claim, but has not filed a
bankruptcy petition. That is, if one spouse in a community
property state has commenced a bankruptcy case where, as
here, no claim is excepted from the debtor's discharge and
is not otherwise found to be nondischargeable, and if the
non-debtor spouse would not have had a claim excepted from
her discharge in a hypothetical case commenced on the same
day as the commencement of the debtor's case, then the
creditors of either spouse holding community claims on the
date of bankruptcy are thereafter barred from asserting
claims against after acquired community property. It was the
duty of the scheduled creditors in the Braden Jay Karber
bankruptcy proceedings to object to the hypothetical
discharge of Valerie Karber, as the non-debtor spouse,
within the same time limits as their objections to the
discharge of Braden Jay Karber. 11 U.S.C. § 524(b). No such
objections were filed and thus all community creditors
before the Court in that case are now barred from seeking to
collect their deficiencies from the after acquired community
property of either Braden Jay Karber or Valerie Karber.
In re Karber 25 B.R. 9, 12 (Bkrtcy.Tex.,1982); See also
In re Dyson 277 B.R. 84 (Bkrtcy.M.D.La.,2002) - note
not 9th Circuit decisions.
Birt vs Birt,
1 CA-CV 03-0258 (Az Ct App Div
1, 8/12/04)
Appellant Judith M. Birt (“Wife”) appeals from the trial
court’s denial of her motion to set aside the decree of
dissolution of her marriage to Appellee John Mark Birt
(“Husband”). We hold that when a party to a dissolution
action files a petition in bankruptcy shortly after entry of
the decree to avoid the decree’s effect on allocation of
community debts and such discharge may significantly affect
the non-discharged spouse’s qualification for spousal
maintenance, child support and the equitable division of
community property, the trial court should vacate those
portions of the decree pursuant to Arizona Rule of Civil
Procedure 60(c)(6)(“Rule 60(c)(6)”) so it can provide relief
to the non-discharged spouse. Based on the record presented
here, the superior court erred when it denied Wife’s motion.
We reverse that order and remand for further proceedings
consistent with this decision.
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